AMD Fires at Intel With 1.8GHz Athlon

The new 1.8GHz Athlon XP 2200+ is about 40 percent smaller than Intel's comparable chip.

Advanced Micro Devices Inc. on Monday released its first desktop processor built using its new 0.13-micron manufacturing process, a method that can produce faster, less power-hungry and smaller chips, which ultimately are cheaper to make.

Though the clock speed of the new Athlon XP 2200+ is 1.8GHz --- only about 6 percent faster than AMDs previous 1.73GHz XP 2100+ --- the chips launch is particularly noteworthy as it marks the product lines migration to a more efficient production method that will enable AMD to remain competitive against Intel Corp.s Pentium 4.

Intel and AMD usually migrate their product lines to more modern manufacturing methods every 18 to 24 months. In general, the switch, known as a process shrink, allows the etching of smaller transistors onto silicon chips. As a result, more transistors can be packed onto the die to improve performance. In addition, the overall chip die is reduced, easing manufacturing costs per chip. Smaller chips also consume less energy.

Intel began migrating its PC processors from a 0.18-micron to 0.13-micron process last year, and in January introduced its first desktop Pentium 4 chip built using the new process. But while Intel migrated first, AMDs chip is less expensive to produce because its XP 2200+ is about 40 percent smaller than a comparable Pentium 4 processor. AMDs chip relies on its lower manufacturing cost per chip to undercut the prices of Intels products, largely viewed as its sole competitive advantage.

However, Intel has recently stepped up the pressure on AMD by slashing prices across its Pentium 4 line more than 50 percent between April and May. The cost-cutting moves effectively eliminated AMDs usual price advantage.

Mondays launch of the XP 2200+ underscored that point, with the chip initially priced at $241, the same price as a 2.2GHz Pentium 4, which AMD claims offers similar performance. (Prices are based on 1,000-unit shipments.)

The relatively low prices stand in stark contrast to the heady days of PC sales growth in late 1999 and early 2000. For example, AMD priced its first 1GHz chip at $1,299 when it was first introduced in March 2000.

Intels spring price cuts, while in keeping with an historical trend, may have undermined the chipmakers profitability amid a continued slump in PC sales.

Last week, Intel stunned Wall Street by lowering its sales forecast for the current quarter. Financial analysts expressed particular concern about Intels projection that its gross profit margins would slip to 49 percent, well below an earlier forecast of 53 percent. The news sent the price of Intel share plummeting about 20 percent over two days.

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